HANO is in disarray, but 'fixable,' HUD declares

Ted Jackson/The Times-Picayune archiveWarren Matthews, left, and Lionel Barra play chess in Matthews' front yard in the Abundance Square community, formerly known as the Desire housing development. The HUD report said support services for renters are lacking at HANO.

The U.S. Department of Housing and Urban Development on Thursday issued a scathing assessment of the Housing Authority of New Orleans, saying its finances are a mess, its staff makes decisions without good information and hundreds of public-housing apartments sit vacant because the agency doesn't have a system to turn them around when families move out.

But despite 74 pages of unrelenting criticism, there was good news within the bad, noted David Gilmore, the leader of a new 12-man turn-around team that HUD sent to New Orleans in November in an unprecedented step meant to right the listing agency, which had previously been run by an often-changing pair of HUD career officials.

Chris Granger/The Times-Picayune archiveThe HUD report found that HANO does not prioritize services for residents. That has led to gaps such as the two-week shuttering in November of the Iberville community center and its Boys & Girls Club program, run by Thaddeus Delay, shown above with Deshawn and Detric Johnson, on fence.

"Based upon our experience working to rejuvenate troubled public-housing programs, it is our view that HANO is eminently 'fixable,'" Gilmore wrote. Within the next few months, he promised, the agency will develop a detailed plan to address the findings and to eventually move HANO to "full functionality" and back under the governance of the city of New Orleans.

HANO projects a $6.7 million loss for its public-housing program this fiscal year, according to the report, which cautions that "due to extensive problems with HANO's internal recordkeeping and reporting systems, all figures cited herein are subject to revision." The report also concluded that lacking "good, accessible data, HANO has developed a culture that is comfortable with uninformed decisionmaking."

Other key points of the assessment include:

HANO's reconstruction of the demolished Big Four complexes has made "slow progress," with two of its deals -- B.W. Cooper and Lafitte -- in jeopardy if Congress doesn't extend its bond deadline. The cost of developing the remaining public-housing apartments that were planned in 2008 is double the money available to HANO, the assessment found. HANO has continued to finance new construction by rolling costs into the subsequent year's budget. "Funding gaps are not addressed but allowed to linger," said the assessment, which also said HANO moves money from one account to another to cover shortfalls as they appear.

Until a sprawling forensic audit is completed, the amount of cash available for HANO's operating budget is "masked," the report said, because the agency doesn't pay bills on time and often pays them from the wrong account. HANO also does not consistently tap into available federal money, hasn't shifted money to the proper accounts to match its commitments and doesn't file required audits on time, it said.

Since financial transactions are processed through three sets of incompatible software, it's nearly impossible to electronically check transactions and flag errors. The department's chronic disarray has left it susceptible to those with crooked intent, such as former chief financial officer Elias Castellanos, who engineered a $900,000 scam, and three accounting employees who remain on leave after the discovery of a scheme that siphoned hundreds of thousands of dollars to one employee's son and former boyfriend. Fraud may also fester longer because HUD's inspector general, which investigates such matters, has not found the agency "particularly responsive" to its requests, the report said.

Many payments are made without proper purchase orders: 84 percent of payments in 2007, 53 percent in 2008 and 37 percent in 2009. The agency also didn't vet contractors for corruption convictions. In addition, the HUD team found it hard to determine whether some sole-source contracts were legal because the documentation was inadequate; several were sent to the HUD inspector general for further investigation.

HANO does not have a plan to adequately repair, renovate or re-fill public-housing apartments, rendering its lists of vacant units meaningless.

HANO's voucher department has delayed rent payments, is far behind on its annual inspections and hasn't properly calculated utility allowance or rents. That leaves "substantial numbers" of Section 8 tenants paying far too much, though voucher-holders aren't supposed pay more than 30 percent of household income toward rent. In at least one case, a tenant's rent as determined by HANO appears to exceed her income, the report said. The entire department was outsourced to a contractor last year after its director Dwayne Muhammad, was terminated following his federal indictment for using a voucher to pay part of his rent. Gilmore has said, meanwhile, that the number of new vouchers that will be issued to the 28,000 families on the program's waiting list will be significantly lower than first predicted.

HANO's salaries seem to be set arbitrarily, and hiring often circumvents the personnel department. Overall, the agency is understaffed or staffed with poorly trained employees. As a result, HANO is too reliant on contractors to perform daily work, particularly in the departments that govern Section 8 vouchers, real-estate management and real-estate planning and development. "If the consultants were to cease providing services, activities within these departments would essentially come to a halt," the analysis said.

The assessment also found that HANO's maintenance reports are spotty and maintenance workers must use their own tools to make repairs, while the HANO security department is understaffed, has outdated equipment and does not produce timely crime reports. Supportive services for residents are also lacking. For public-housing renters, there is "no clear indication that the services or the approach meet the needs of residents," the report concludes.

"We've seen these kinds of issues at other housing authorities that have gotten back on solid footing and turned themselves around," said Sandra Henriquez, HUD's assistant secretary for public and Indian housing. "We want HANO to join that alumni club."